Business | Technology
Foxconn cuts target as size brings challenge
Demand for iPhones and iPads fails to offset slowing computer sales, prompts re-evaluation
- Bloomberg
- Published: 00:00 September 6, 2010
Shenzhen, China: Foxconn Technology Group Chairman Terry Gou cut his long-term growth target for the world's largest contract manufacturer of electronics by half as demand for Apple Inc iPhones and iPads fails to offset slowing computer sales.
Gou, who founded the Taiwanese company in 1974, will tell managers that he's lowering Foxconn's annual sales growth target to 15 per cent from the 30 per cent fixture set for more than a decade, the chairman said.
"How many companies have grown this big and still grow 30 per cent?" Gou, 59, said in an interview at his office in Shenzhen, China yesterday for Bloomberg BusinessWeek's upcoming edition, Fifteen per cent is also big.
The reduced target, like the spate of suicides that's kept him in Shenzhen since May, may underscore the challenges of managing a business that generates more sales than Apple or Dell Inc, and employs almost one million workers.
Taiwan's richest man is planning to expand production in the US and enter fields such as biotechnology to sustain growth.
"I don't think investors are ready to hear news of such a big cut in the growth target," said Vincent Chen, who rates shares of Foxconn's flagship Hon Hai Precision Industry Co unit "hold" at Yuanta Securities Co in Taipei.
Underperforming stock
"These problems, including lower market growth, are giving Gou the biggest challenge he's ever faced."
Hon Hai has fallen 18 per cent in Taipei trading this year, underperforming the island's Taiex Index, after the deaths of at least 10 workers led Gou to raise wages and accelerate factory relocation plans in China.
The stock's tripled this decade, giving Hon Hai a larger market value than electronics companies such as Sony Corp or Panasonic Corp.
Worldwide growth in shipments of computers, Foxconn's main business, will slow to 12 per cent in 2011 from 18 per cent this year, according to estimates at Taipei-based Capital Securities Corp.
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